Apart from the tragic human consequences of the COVID-19 coronavirus epidemic, the economic uncertainty it has sparked will likely cost the global economy $1 trillion in 2020, the UN’s trade and development agency, UNCTAD, said on Monday.
“We envisage a slowdown in the global economy to under two per cent for this year, and that will probably cost in the order of $1 trillion, compared with what people were forecasting back in September,” said Richard Kozul-Wright, Director, Division on Globalization and Development Strategies at UNCTAD.
Launching the UNCTAD report as world financial markets tumbled over concerns about supply-chain interruptions from China, and oil price uncertainty among major producers, Mr. Kozul-Wright warned that few countries were likely to be left unscathed by the outbreak’s financial ramifications.
One “Doomsday scenario” in which the world economy grew at only 0.5 per cent, would involve “a $2 trillion hit” to gross domestic product, he said, adding that collapsing oil prices had been “a contributing factor to that growing sense of unease and panic”.
While it was difficult to predict how the international financial markets will react to COVID-19’s impacts “what they do suggest is a world that is extremely anxious”, he said.
“There’s a degree of anxiety now that’s well beyond the health scares which are very serious and concerning.”
To counter these fears, “Governments need to spend at this point in time to prevent the kind of meltdown that could be even more damaging than the one that is likely to take place over the course of the year”, Mr. Kozul-Wright insisted.
Asked about how different countries might react to the crisis including China – where the virus first emerged in December – and the United States, the senior UN economist said that the Chinese Government would likely introduce significant “expansionary measures” – shorthand for increasing spending or tax cuts.
“It will almost certainly do that,” he said. “Will the US Government in an election year, which is where we are…also need to respond in a way other than simply cutting taxes and reducing interest rates? I suspect it will do.”
Turning to Europe and the Eurozone, Mr. Kozul-Wright noted that its economy had already been performing “extremely badly towards the end of 2019”.